Pr. Commissioner Of Income Tax -7 v. M/S Ptc India Financial Serviceslimited

$~31 *IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 349/2022 PR. COMMISSIONER OF INCOME TAX -7 versus M/S PTC INDIA FINANCIAL SERVICESLIMITED ..... Respondent Through:Mr.SalilKapoor,Mr.SumitLalchandani & Ms. Ananya Kapoor,Advocates. Date of Decision: 22[nd]September, 2022 % CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORAJ U D G M E N T MANMOHAN, J (Oral): 1.Present income tax appeal has been filed challenging the order dated19[th]February, 2021, passed by the Income Tax Appellate Tribunal (‘ITAT’)in ITA No. 1267/Del./2015 for the Assessment Year 2010-11. 2.Learned counsel for the appellant states that the ITAT has erred indeleting the disallowance of Rs.4,74,88,156/- made under Section 14A ofthe Income Tax Act, 1961 (‘the Act’) read with Rule 8D of Income TaxRules (the ‘Rules’) and in not appreciating the fact that the assessee hadearned tax free dividend income of Rs.4,63,01,246/- during the year underconsideration that needed to be apportioned. ITA 349/2022 3.He further states that the ITAT has erred in deleting the disallowanceof Rs.19,39,69,553/- under Section 32 of the Act based on the documentaryevidence which was never submitted before the Assessing Officer andadmitted by the Appellate Authority in violation of Rule 46(3) of the Ruleswithout giving an opportunity to the Assessing Officer (‘AO’) to examinethe claim. 4.A perusal of the paper book reveals that the AO rejected the assesseecompany’s computation on the ground that the “assessee company hadraised substantial amount of loans for investment in new ventures on whichsubstantialamountofinterestwaspaid”.However,theAppellateAuthorities below held that the investments were made out of assessee’sown funds and no borrowed funds were used to acquire investments.Consequently, there was no interest expenditure which could be directly orindirectly attributed to the exempt income. Therefore, the AppellateAuthorities upheld the suo moto disallowance of Rs. 16,05,000/- made bythe assessee after taking20%of employee cost and 5% of theadministrative cost. 5.The Supreme Court in South India Bank Ltd. v. Commissioner ofIncome Tax,[2021] 10 SCC 153 has held that where the assessee hasmixed funds (made up partly of interest free funds and partly of interestbearing funds) and the payment is made out of mixed fund, the investmentmust be considered to have been made out of the interest free fund. TheSupreme Court in the said judgment held “...in respect of payment made outof mixed fund, it is the assessee who has such right of appropriation andalso the right to assert from what part of the fund a particular investment is ITA 349/2022 Page 2 of 3 made and it may not be permissible for the Revenue to make an estimationof a proportionate figure...” 6.Further, the Commissioner of Income Tax (Appeals) [‘CIT(A)’]deleted the additions under Section 32 based on documents which were dulysubmitted to the AO as well as CIT(A). The CIT (A) duly considered thedocuments on record and after the verification of the evidence, rightlydeleted the addition. The ITAT has even recorded that the details weresubmitted by the assessee during the assessment proceedings as per thereply/submissions dated 11[th]December, 2012 which is mentioned at page 1of the assessment order itself. The ITAT has also recorded that there was nonew evidence brought on record by the assessee and in fact, the AO hastotally ignored the reply dated 11[th]December, 2012, filed by the Assessee. 7.Consequently,boththeappellateauthoritiesbelowhaverecorded concurrent findings of fact on both the issues. Accordingly, thisCourt is of the view that no substantial question of law arises forconsideration in the present appeal and the same is dismissed. MANMOHAN, J SEPTEMBER 22, 2022/msh MANMEET PRITAM SINGH ARORA, J ITA 349/2022